Question

Last year, net operating income before taxes was $100,000. Sales totaled $350,000; selling administrative expenses totaled $50,000. Cost of goods sold was

Answer 1

The cost of goods sold can be calculated by subtracting selling and administrative expenses and net operating income before taxes from total sales. For last year, the cost of goods sold was $200,000.

Step-by-step explanation:

The question involves determining the cost of goods sold based on given financial data. To find the cost of goods sold, we use the basic profit formula which is:

Net Operating Income = Sales - Cost of Goods Sold - Selling & Administrative Expenses.

We can rearrange this formula to solve for Cost of Goods Sold:

Cost of Goods Sold = Sales - Selling & Administrative Expenses - Net Operating Income before taxes.

Using the provided data:

Cost of Goods Sold = $350,000 (Sales) - $50,000 (Selling Administrative Expenses) - $100,000 (Net Operating Income before taxes)

So, the Cost of Goods Sold equals $200,000.

The firm's accounting profit can be calculated by subtracting the explicit costs from the total revenues. In this case, the total revenues are $1 million and the explicit costs are the sum of labor, capital, and materials, which is $950,000. Hence, the accounting profit is $1,000,000 - $950,000 = $50,000.